If you stopped any Canberran on the street and asked them if they thought lifting building standards was a good idea, they'd likely, and very reasonably say "yes".
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The Property Council agrees.
If the conversation continued, we'd also likely agree that Canberrans deserve quality homes to house its growing population, and that better consumer protections and tools that promote transparency would be a good thing for the community.
Knowing this, the ACT government is attempting to achieve these noble and agreeable outcomes.
Yet its proposed solution - a new developer licensing regime - is akin to a policy missile being used to crack open a nut.
And if implemented, it will increase the cost of new homes in Canberra.
Something all of us also agree is definitely not a good thing for the community.
Unamended, the government's developer licensing regime goes far beyond the issue it is trying to address. Instead, it will directly dent investment in new stock, increase the cost of new homes and increase our rents in Canberra.
If applied, the regime will mean a company director could be issued a personal rectification order for a future defect that their development company did not cause. But this doesn't just apply to your big end-of-town developments that build the majority of our homes, this will also apply to the family investor.
Anyone that develops a property for profit will face personal liability. This will mean if anyone from the community wants to develop an investment property, they will face personal liability and could face significant personal ramifications including potential bankruptcy.
This untested shift in responsibility not seen in any other jurisdiction will create a bizarre legal burden that would be unique and uniquely costly to our territory.
Consider this example: Let's say you buy a car from a manufacturer, and drive it happily for a year, rightly having it serviced with your local mechanic. Following the service, it emerges your brakes weren't appropriately serviced, and you have an accident. It would make sense to then pursue a course of action with that local mechanic.
But if we apply the regime model to this example, you'd instead be able to personally pursue the director of the car company's manufacturer. It doesn't make legal sense or pass a logic test.
The potential impact of the personal liability in the proposed regime is that it will deter investment by making the risk unacceptably high for directors and institutional investors. It will also seriously impact our ability to achieve the missing middle and deter individuals wanting to develop new properties through the RZ2 or RZ1 rules.
Additionally, it's highly unlikely to succeed. There are only extreme examples in Australia of an ability to pierce the corporate veil and make directors accountable for issues outside of their control.
The Property Council supports a considered approach that looks to the NSW Design and Building Practitioners Act. This includes accreditation and registration for everyone involved in the building chain without personal liability that deters investment.
If we apply this first-of-its-kind personal liability on developers, it runs the very real danger of reducing residential development, employment, housing supply and affordability. This should not be set up in isolation of the ecosystem of building quality.
When you set up a new scheme in isolation from the rest of the country, that you know will repel investment, you simply add price pressures to homes which are already expensive by national standards. Building in extra costs to the housing system is an odd decision when housing shortages and high rents are already biting.
We need residential investment and development in Canberra. We need more houses for Canberrans.
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And we need to improve the affordability and choice of those houses.
The solution here? First, amend the proposed policy to create a wholistic system of protection.
That includes bringing the policy in line with other jurisdictions like NSW and QLD, holding trades such as water proofers to account and require them to be licensed and accountable to defects, and address the 24 recommendations in the Shergold Weir report on building compliance and confidence which is the hallmark for lifting building quality.
That way, we'll have a system of viable and workable protections we can all agree on.
- Shane Martin is the Property Council's ACT and Capital Region executive director.
